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FED Meeting This Week: What Can We Expect?
Macro

FED Meeting This Week: What Can We Expect?

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31 OCT, 2023

By Johanna Zidani from RankiaPro Europe

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This Tuesday and Wednesday, the Fed is meeting. An encounter in which it is expected that the United States central bank will maintain its current position and not raise interest rates. However, we will need to pay attention to Jerome Powell's appearance on Wednesday, November 1st.

Below, we provide you with the perspectives held by national and international fund managers regarding the upcoming Federal Reserve meeting.

François Rimeu, Senior Strategist, La Française AM

As suggested by Federal Reserve (Fed) Chair Powell’s cautious message at the Economic Club of New York on October 19, the Federal Open Market Committee (FOMC) is expected to maintain the federal funds target rate steady at its November meeting. Indeed, fast-soaring long-term interest rates have further tightened financial conditions.

Please find below what we expect:

  • The target range for the Fed’s benchmark rate to remain unchanged at between 5.25% to 5.50% even though the latest economic data reflects robust 3rd quarter activity.
  • Fed Chair Powell will emphasize that given FOMC tightening actions since March 2022 and the rapid rise in long-term Treasury rates since September, the US economy is poised to slow in the coming months. However, Mr. Powell will likely leave the door open to a potential rate increase after November if policymakers see further signs of resilient economic growth.
  • The Fed to pursue its balance sheet reduction plan at $95bn per month.

In summary, Fed Chair Powell’s recent comments, ahead of the current blackout period, echo those of other Fed officials:  rates will have to remain high for an extended period of time until the Fed is confident that inflation will drop down to the 2% target rate. Consequently, we do not expect any surprises. FOMC announcements should have a limited impact on financial markets.

Paolo Zanghieri, senior economist at Generali Investments

As widely communicated by Jerome Powell, the Fed will stay on hold on Wednesday, despite the strong GDP prints. Further rate hikes are possible in December and January, but look unlikely as tighter financial condition will increasingly dampen demand and inflation is slowly heading down.  We expect the press release and the Q&A session to show a hawkish tilt; risks to growth in the short-term have decreased, but the Fed must keep its credibility on the commitment to keeping rates at the current level for a long period (until at least June, in our view). 

James McCann, deputy chief economist, abrdn

The Fed is set to hold rates unchanged at its next meeting. Based solely on economic activity, there would be a strong case for an interest rate hike, against the backdrop of blockbuster Q3 GDP growth, brisk payroll gains and firmer inflation over September. However, rising market
interest rates and struggling risk assets push in the other direction, with these headwinds expected to weigh on growth and inflation moving forward. Indeed, a host of FOMC members have flagged that this adjustment has already delivered an effective tightening in policy settings. “Despite these concerns, the Fed will not be calling it quits at this meeting and is likely to continue to signal that rates may need to rise further. Certainly, it will be concerned that current run rates of growth will make it harder to drag inflation back to target, and if there are
no signs of slowing by December a hike will come back onto the table.

Gilles Moëc, Chief Economist at AXA IM

Pre-purdah Fedspeak was clearly indicative of the central bank staying “pat” this week. Focus is likely to be on how Jay Powell will balance his answers to two obvious questions: how the sustained resilience in the US data fits with their current stance, and how the Fed takes the current market-led tightening in financial conditions into consideration. His speech at the New York Economic Club we think provides an easy template for his press conference this week: precisely, the market moves to some extent “offset” the dataflow and allows the Fed to remain in monitoring mode. On Tuesday, the release of the Employment Cost Index for Q3 – a measure which tends to be more reliable than what comes out of the payrolls – could help Powell justify the continuation of the pause if it confirms that the resilience in job creation is accompanied by the beginning of a slowdown in wages, especially if the JOLTs number (out the

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